2020 BUDGET ADDRESS BY HONOURABLE DR. BWALYA K.E.

NG’ANDU, MP,
MINISTER OF FINANCE, DELIVERED TO THE NATIONAL ASSEMBLY ON
FRIDAY 27TH SEPTEMBER, 2019
 2020 BUDGET ADDRESS BY HONOURABLE DR. BWALYA K.E. NG’ANDU, MP,
MINISTER OF FINANCE, DELIVERED TO THE NATIONAL ASSEMBLY ON
FRIDAY 27TH SEPTEMBER, 2019
1. Mr. Speaker, I beg to move that
the House do now resolve into Committee
of Supply on the Estimates of Revenue
and Expenditure for the year 1st January,
2020 to 31st December, 2020 presented
to the National Assembly on Friday, 27th
September, 2019.
2. Sir, I am a bearer of a message from
His Excellency, Dr. Edgar Chagwa Lungu,
President of the Republic of Zambia,
recommending favourable consideration
of the motion that I now lay on the Table.
3. Mr. Speaker, as this is my first
Budget Address to this August House, it
is befitting that I begin by thanking His
Excellency, Dr. Edgar Chagwa Lungu,
President of the Republic of Zambia for
granting me the honour to serve as Minister
of Finance. It is indeed a rare opportunity,
and I hereby commit myself to work
towards achieving economic stabilisation
and growth in order to improve the lives of
our people.
4. Sir, allow me to thank my
predecessor, Honourable Margaret D.
Mwanakatwe, MP, for her stewardship of
the economy as Minister of Finance. I will
continue to build on the foundation that
she has laid in steering our economy and
the nation forward.
5. Mr. Speaker, on 13th September,
2019, His Excellency, Dr. Edgar Chagwa
Lungu, President of the Republic of Zambia
officially opened the Fourth Session of the
Twelfth National Assembly. In his address,
the President outlined, among others, the
key challenges of limited fiscal space and
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the devastating impact of climate change.
In this context, the President called upon
us to work together as a people to achieve
economic stability, sustainable growth and
development, within the spirit of “doing
more with less”.
6. Sir, the 2020 Budget takes into
account the challenges highlighted by His
Excellency the President. The Budget and
the policy measures, therefore, prioritise
creating fiscal space, ensuring debt
sustainability and dismantling domestic
arrears. I will pay particular attention
to the dismantling of arrears related to
pensioners and suppliers of goods and
services to Government.
7. Mr. Speaker, these measures
are aimed at alleviating hardships to
those owed money by the Government,
preserving businesses, saving jobs,
increasing liquidity and in so doing
boosting economic activity. Further,
Government will hence forth strictly
enforce the provision requiring 20 percent
allocation to Zambians of works carried
out by foreign contractors as part of the
empowerment agenda. This Budget will
also outline some measures to mitigate
the effects of climate change, which has
negative impacts on especially the poor
and small businesses.
8. Sir, the theme for the 2020 Budget
is therefore “Focusing national priorities
towards stimulating the domestic
economy.” For this Budget to achieve its
objectives, it will require us to deliver
on our commitments with discipline,
determination and dedication. This is in
accordance with our National values and PART I
Principles of ethics, patriotism, national
unity and integrity as enshrined in the GLOBAL AND DOMESTIC
Constitution. All of us, the public sector, ECONOMIC DEVELOPMENTS IN
the private sector, civil society and every 2019
Zambian are therefore called to focus our
Global Economic Developments
priorities towards building the Zambia we
want. The time to act is now! Our resolve
10. Mr. Speaker, the world economy is
to do so must be firm.
expected to record a reduction in growth
in 2019, with real output growth estimated
9. Mr. Speaker, allow me now
at 3.2 percent compared to 3.6 percent in
to provide an outline of my budget
2018. This is mainly on account of the trade
presentation. In Part One, I will highlight
war between the United States of America
the global and domestic economic
and China, prolonged uncertainty on
developments in 2019. In Part Two, I will
Brexit and geo-political tensions.
present the macroeconomic objectives,
policies and strategies for 2020. In Part
11. Sir, in advanced economies,
Three, I will provide the details on the
growth is projected to fall to 1.9 percent in
estimates of revenue and expenditure for
2019 from 2.2 percent in 2018. In emerging
2020. Finally, in Part Four, I will conclude
market and developing economies,
my address.
growth is projected to slowdown to 4.1
percent compared to 4.5 percent in 2018.
However, in Sub-Saharan Africa, growth
is expected to improve from 3.1 percent in
2018 to 3.4 percent in 2019. This is mainly
due to growth in non-resource intensive
countries.

12. Mr. Speaker, commodity prices

have generally been lower over the first
eight months of 2019 due to a fall in global
demand. Copper prices averaged US$ 6,091
per metric tonne compared to US$ 6,723
per metric tonne over the corresponding
period in 2018. Over the same period,
crude oil prices averaged US$ 63 per barrel
compared to US$ 71 per barrel. However,
disruptions to global supply of oil arising
from geo-political tensions affecting the
Middle East may raise oil prices.

13. Sir, I now turn to review the

performance of the Zambian economy in
2019.
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Domestic Economic Developments
Economic Growth
14. Mr. Speaker, preliminary data
indicate that growth in 2019, initially
projected at 4 percent, will slowdown
to 2 percent compared to 3.7 percent in
2018. This is mainly on account of adverse
climatic conditions, particularly poor
rainfall in the 2018/2019 rainy season,
which negatively affected agricultural
production and electricity generation.
The lower electricity generation has had
negative spill-over effects on other sectors.
15. Sir, growth has further been
adversely affected by a decline in copper
output due to low grades of ore at some
mines coupled with lower copper prices,
mainly attributed to the fall in global
demand. In addition, tight liquidity
conditions mainly attributed to external
debt servicing and as reflected in the
accumulation of domestic arrears, have
contributed to subdued economic growth.
16. Mr. Speaker, notwithstanding the
general slowdown in the economy, the
service sector has performed favourably,
especially the wholesale and retail
trade, information and communication
technology, and financial services.
Budget Performance
17. Mr. Speaker, for the period January
to August 2019, revenues and grants, at
K42.8 billion, exceeded their target by
9.1 percent while expenditures including
amortisation, at K60.9 billion, were above
target by 3.4 percent.
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18. Sir, despite the positive
performance of revenues and grants,
budget implementation has faced
various challenges. These include under-
subscriptions on Government securities
auctions and the depreciation of the Kwacha
against the United States dollar, which
contributed to higher than programmed
external debt service payments.
19. Sir, although the revenue outturn
is projected to be above the 2019 target,
the outlook for financing remains weak.
Financing continues to be constrained by
tight liquidity conditions in the domestic
market coupled with an unfavorable
global environment. The budget deficit is,
however, estimated to close in line with
the target of 6.5 percent of GDP on a cash
basis.
20. Mr. Speaker, I will later in my
Address outline measures Government
will implement to reduce the deficit in
2020.
External Sector Performance
21. Mr. Speaker, over the first half of
2019, the current account deficit narrowed
to US$ 414.4 million or 1.7 percent of GDP
from US$ 586.1 million or 2.2 percent
of GDP during the same period in 2018.
This was due to a larger decline in imports
relative to exports.
22. Sir, export earnings, at US$ 4.0
billion, were 14.7 percent lower than US$
4.6 billion realised over the same period in
2018. Copper export earnings declined by
22.0 percent to US$ 2.8 billion from US$
3.5 billion, following a decline in both
export volumes and copper prices.
23. Mr. Speaker, non-traditional
export earnings, however, increased by
17.2 percent to US$ 1.1 billion from US$
911 million over the first half of 2018. This
outturn was attributed to higher exports
of gemstones, cement, lime, sulphuric acid
and sugar.
24. Sir, imports of goods declined by
21.4 percent to US$ 3.3 billion from US$
4.2 billion over the same period in 2018.
This followed a reduction in importation of
copper ores, concentrates, motor vehicles,
chemicals and other intermediate goods.
25. Mr. Speaker, gross international
reserves declined to US$ 1.4 billion at
end-July 2019 from US$ 1.6 billion at end-
December 2018. At this level, reserves
were equivalent to 1.7 months of import
cover. The reduction in reserves was
mainly attributed to external debt service
payments. The moderate reduction in
reserves was due to net purchases of foreign
exchange from the market amounting to
US$ 387.4 million and mineral royalty tax
receipts of US$ 191.9 million. The target
of the Government is to increase reserves
to at least 3 months of import cover in the
medium term.
26. Sir, in the foreign exchange market,
the Kwacha depreciated by 9.4 percent to
an average of K13.03 per United States
dollar in August 2019 from K11.91 per
United States dollar in December 2018.
The depreciation was largely on account
of increased demand for debt service,
energy imports and the strengthening of
the United States dollar.
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Debt Position
27. Mr. Speaker, the external debt
stock as at end-June 2019 increased to US$
10.23 billion from US$ 10.05 billion at the
close of 2018. This was mainly on account
of disbursements on existing loans. The
rate of debt accumulation at 1.9 percent
was lower than the 7.6 percent recorded in
the corresponding period in 2018.
28. Sir, the stock of Government
guarantees, on a net basis, was US$ 1.2
billion as at end-June 2019.
29. Mr. Speaker, the stock of
Government securities increased to
K60.7 billion as at end-August 2019. This
is a 4.1 percent increase from the K58.3
billion recorded at end-December 2018,
attributed to new issuances on a net basis.
30. Sir, domestic arrears, exclud-
ing VAT refunds, as at end-June 2019
amounted to K20.2 billion from K15.6
billion in December 2018.
Monetary and Financial Performance
31. Mr. Speaker, average inflation
remained broadly in line with the 6 to 8
percent target range in the earlier part of
2019. In the second quarter, inflationary
pressures built up, resulting in inflation
breaching the upper bound of the target
range in May, 2019 at 8.1 percent. As at
end-August 2019, inflation rose further to
9.3 percent. This was largely on account of
higher food prices and the pass-through
effects from the depreciation of the Kwacha
against the United States dollar. To counter
inflationary pressures, the Policy Rate was
adjusted upwards to 10.25 percent in May
2019 from 9.75 percent in December 2018.
32. Sir, the commercial banks’ average
lending rate rose to 26.0 percent in August
2019 from 23.6 percent in December 2018.
Domestic credit to the private sector grew
by 9.0 percent to K36.2 billion in August
2019 from K32.9 billion in August 2018.
33. Mr. Speaker, the banking sector’s
overall performance and condition was
rated satisfactory in 2019, mainly on the
backdrop of a strong aggregate capital
adequacy. The ratio of non-performing
loans to total loans dropped to 9.4 percent
at end-August 2019 from 11.0 percent at
end-December 2018. This is within the
prudential threshold of 10.0 percent.
34. Sir, the overall performance
and condition of the non-bank financial
institutions sector was rated fair. The non-
performing loans ratio at 24.8 percent,
however, remained above the prudential
threshold of 10.0 percent.
35. Mr. Speaker, the implementation
of the National Financial Switch project,
which will allow universal access to digital
transacting, has made significant progress.
All domestic Automated Teller Machine
transactions by the various commercial
banks are now being channeled through
the National Financial Switch Platform.
The project will be fully implemented by
end-December 2019. This will reduce
dependency on cash and its associated
risks.
5
PART II
MACROECONOMIC OBJECTIVES,
POLICIES AND STRATEGIES FOR
2020
36. Mr. Speaker, the 2020 Budget
will focus on stimulating the domestic
economy by reducing the budget deficit,
rationalising debt contraction and
dismantling of domestic arrears while
protecting social sector allocations.
This is in line with the Seventh National
Development Plan, austerity measures
and key reform areas in the Economic
Stabilisation and Growth Programme.
37. Sir, the macroeconomic targets for
2020 are to:
i. Achieve a real GDP growth rate
of at least 3 percent;
ii. Achieve and maintain inflation
within the target range of 6 to 8
percent;
iii. Increase international reserves
to at least 2.5 months of import
cover;
iv. Reduce the fiscal deficit to 5.5
percent of GDP; and
v. Increase domestic revenue
mobilization to at least 22
percent of GDP.
38. Mr. Speaker, I now present the
detailed macroeconomic policies for 2020,
in line with the pillars of the Seventh
National Development Plan. I wish to point
out that the activities under each pillar are
within the Budget resource envelope. As
we carry out these activities, crosscutting
issues of gender, youths and disability will
continue to be mainstreamed.
39. Sir, I recognize the support
of cooperating partners and other
stakeholders in the implementation of
various programmes in the Budget.
PILLAR ONE: ECONOMIC
DIVERSIFICATION AND JOB
CREATION
40. Mr. Speaker, the tight fiscal space
for 2020 requires refocusing our resources
on priority areas to achieve more with
less. We are confident that economic
diversification and job creation can be
attained with continued public and private
investments in the agriculture, tourism,
mining, energy and manufacturing sectors.
Agriculture, Livestock and Fisheries
41. Mr. Speaker, the 2018/2019
farming season underscored the
continued challenge of climate change
and therefore the importance of risk
mitigation and management measures.
Addressing climate related challenges
requires the adoption of climate smart
agricultural technologies and practices.
These are already being disseminated
in the 2019/2020 farming season and
will continue in the subsequent farming
seasons. Further, to provide our farmers
with the latest weather information,
Government has continued to build
capacity in the Zambia Meteorological
Department to improve early warning
systems.
42. Sir, in order to reduce dependence
on rain-fed agriculture, Government
working with Cooperating Partners will
continue with irrigation development
projects. The construction of the dam at
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Mwomboshi in Chisamba District has
been completed, while the irrigation
scheme will be completed in 2020. The
works at Lusitu Irrigation Scheme in
Chirundu District have reached 85
percent completion, while works at the
Musakashi South Irrigation Scheme in
Mufulira District has reached 50 percent
completion. Recently, the Government
commissioned Chiansi Irrigation Scheme
Project in Kafue District which is expected
to benefit over 1,000 households.
43. Mr. Speaker, Government will
continue supporting eligible farmers under
the Farmer Input Support Programme.
For the 2019/2020 farming season,
Government has already commenced the
distribution of inputs across the country
under the direct input supply model
targeting 60 percent of the one million
eligible beneficiary farmers. The balance
of 40 percent of the eligible beneficiary
farmers will be covered under the
e-voucher system.
44. Sir, Government will reform the
implementation and management of the
Farmer Input Support Programme so as
to cut the administrative costs as well as
avoid wastage. To ensure wider e-voucher
coverage, Government will speed up
the construction of telecommunications
towers across the country to address
connectivity challenges.
45. Mr. Speaker, in the livestock sub-
sector, the prevalence of animal diseases
such as foot and mouth disease has
negatively affected the performance in
recent years. To address this situation,
Government is stepping up farmer
sensitisation, vaccinations, movement
restrictions and enforcement of bio-
security measures on farms. Further,
construction and rehabilitation of dip
tanks across the country has continued.
Acting on the commitment made in last
year`s Budget Address, a total of 80 dip
tanks have been constructed while 153
have been rehabilitated this year.
46. Sir, to improve the quality of the
national livestock herd, Government has
rehabilitated and stocked 15 livestock
breeding centres across the country. The
centres provide artificial insemination
and other breeding services. Further, 87
livestock service centres have so far been
constructed where dipping, branding,
vaccination and other disease control
services are provided. This is in addition
to the setting up of regional and district
laboratories, and quarantine centres across
the country.
47. Mr. Speaker, to promote
aquaculture farming, I will provide
appropriate incentives to stimulate activity
in the sector. Further, we will continue to
build capacity among fish farmers through
training. So far, 270 farmers have been
trained under the Zambia Aquaculture
Enterprise Development Project. The
Project aims to train more than 1,000
farmers by 2022. The objective of these
interventions is to raise productivity
and make Zambia self-sufficient in fish
production.
Industrialization
48. Mr. Speaker, under the
National Industrial Policy, Government
aims to promote an export-oriented
industrialisation. Progress is being
recorded in the export of products such as
cement, honey and detergents. In line with
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the National Local Content Strategy, these
products are being manufactured from
local raw materials.
49. Sir, to support locally owned
small enterprises undertaking light-
manufacturing such as carpentry and
foundry, Government is establishing
Industrial Yards across the country.
Industrial Yards being constructed in
Solwezi, Ndola, Kasama, Mongu and
Chipata districts, are expected to be
completed this year, while those in Kitwe,
Lusaka and Mansa, will be completed in
2020. Upon completion, these yards will
result in increased access to processing
facilities and the creation of more than
4,000 direct jobs.
Regional and International Trade
50. Mr. Speaker, Government will
continue securing markets and facilitating
trade with our regional and international
trading partners, particularly for non-
traditional exports. A key development in
securing markets was the signing of the
African Continental Free Trade Agreement
by Government. This Agreement will create
a market that will offer vast opportunities
for growth and job creation. Government
will therefore, put in place measures to
ensure that the country benefits from the
continental market.
Tourism
51. Mr. Speaker, in a bid to diversify
the tourism sector and contribute to
job creation, Government will focus on
developing the Northern Circuit and
facilitating the actualization of pledges
in the sector made during the provincial
Investment Expositions. This will be done
through the rehabilitation of roads to
and within the tourist sites. The priority
will include enhanced promotion of the
Lumangwe, Kalambo and Kabwelume
water falls as well as revamping tourism
activities around the Samfya Beach.
Mining
52. Mr. Speaker, to diversify the
mining sector, Government is promoting
the exploration of non-traditional minerals
such as gold and manganese. In this regard,
I will in this Budget allocate additional
resources for the generation of geological
information on the extent of these deposits
in order to attract investment.
Energy
53. Mr. Speaker, the energy sector has
been adversely affected by climate change
especially in the second half of 2019.
This has widened the electricity deficit in
the country thereby negatively affecting
business operations and communities
due to increased hours of load shedding.
Government will step up the diversification
of energy sources in order to build
resilience to the negative effects of climate
change.
54. Mr. Speaker, the Bangweulu and
Ngonye Solar Power Plants generating a
combined total of 90 megawatts have been
completed and are operational. Further,
the construction of the 750 megawatts
Kafue Gorge Lower Hydropower Station
Project and upgrading of Lusiwasi Upper
Hydropower Station to 15 megawatts are
expected to be completed in 2020. The
upgrading of Chishimba Falls Power
Station from 6 megawatts to 15 megawatts
will commence in 2020. In addition, the
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developer of the 2,400 megawatts Batoka
hydropower plant between Zambia and
Zimbabwe has been identified.
55. Sir, Government will accelerate
reforms that will ensure that the energy
sector attains cost reflective tariffs to
attract investments in various sources of
power generation in addition to hydro
power. The diversification of the energy
mix is in response to the challenges of
climate change.
Information and Communication
Technology
56. Sir, to enhance transparency and
accountability in public service delivery,
Government will continue rolling out
electronic platforms. This will not only
reduce the cost of doing business for both
the private and public sectors, but also
enhance information sharing.
57. Mr. Speaker, Government has
started actualizing the Government Service
Bus that will connect 28 Government
services on an online platform. This
will limit human-to-human interaction,
thereby, reducing revenue leakages.
Under Immigration, Government has
made significant progress by actualizing
the online processing of visas and work
permits. This has resulted in efficiency,
cost reduction and increased revenue
collection.
58. Sir, with regard to the
e-Government programme, Smart Zambia
has so far connected 122 Government
departments to the Government Wide
Area Network. A further 50 will to be
connected in 2020. This connectivity will
ensure that Government transactions are
paperless and reduce operational costs.
59. Mr. Speaker, the Social Cash
Transfer programme will now be
administered electronically to authenticate
beneficiaries. Additionally Government
will carry out a comprehensive review of
the Programme to assess its effectiveness.
Similarly, work has commenced to
authenticate the beneficiaries of the
Farmer Input Support Programme.
60. Mr. Speaker, increased access
to ICTs for people in unserved and
underserved areas is a priority. Government
will therefore continue the construction of
Communication Towers. A total of 667
out of the target of 1,009 have so far been
constructed of which more than 500 are
operational.
61. To ensure effective management of
the public service wage bill, Government
will carry out a comprehensive review and
verification of the payroll using electronic
platforms.
Road Transport Infrastructure
62. Mr. Speaker, in the spirit of doing
more with less, our strategy will be to
rescope existing projects, seek alternative
financing to debt contraction and
increase the use of local contractors in the
implementation of these projects.
63. Sir, Government will continue
to expand the National Road Tolling
Programme which will be the backbone
of the road maintenance programme. As
at August 2019, a total of K765 million
was raised compared to K549 million
over the same period in 2018 under the
programme.
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Air Transport
64. Mr. Speaker, in the air transport
sector, the expansion and modernisation of
the Kenneth Kaunda International Airport
has reached over 85 percent completion
and is scheduled to open in 2020. This will
support the strategy of making Zambia an
air transport hub. The construction of the
Copperbelt International Airport, which
commenced in 2019, is on schedule and is
now at 50 percent completion. Works on
the Copperbelt International Airport will
continue in 2020.
Water Resources Development and
Management
65. Mr. Speaker, under water resources
development, Government undertook
rehabilitation of dams across the country
to ensure availability of water. To safeguard
water resources in the midst of devastating
climate change effects, Government will
intensify programmes aimed at preventing
environmental degradation.
PILLAR TWO: POVERTY AND
VULNERABILITY REDUCTION
66. Mr. Speaker, Government remains
committed to reducing poverty and
vulnerability amidst the effects of climate
change. The vulnerable members of
our society such as the youths, women,
aged and persons with disabilities are
disproportionately affected by the effects
of climate change. In this regard, in 2020,
Government will continue to implement
policies aimed at mitigating the effects
of climate change and empowering the
vulnerable.
Climate Change PILLAR THREE: REDUCING
DEVELOPMENTAL INEQUALITIES
67. Mr. Speaker, as I have already
indicated, interventions are being 70. Mr. Speaker, Government
undertaken to mitigate and manage is concerned with the high levels of
the effects of climate change in various developmental inequalities between
sectors. Government is empowering rural rural and urban areas and the need to
communities in Central, Eastern, Southern pursue a unified and integrated national
and Western Provinces with information development for all.
on better use and management of the
resources. Over 500,000 direct beneficiaries 71. Sir, Government will in 2020
have been supported to enable them adopt prioritise completion of ongoing
climate resilient practices. To finance these education, health and water and sanitation
interventions, Government will continue infrastructure in rural areas in order to
to mobilize resources under various increase access to basic social services.
initiatives. Government will also continue with the
improved rural connectivity project,
Social Protection Programmes construction of communication towers
and the rural electrification programme.
68. Mr. Speaker, social protection Under the improved rural connectivity
programmes shall continue to be extended project, a total of 3,375 kilometers
to the most vulnerable in our society even of selected rural gravel roads will be
in the midst of tight fiscal conditions. In rehabilitated over a five-year period to
this regard, Government will continue to improve access to markets.
support the social cash transfer scheme,
food security pack as well as women and PILLAR IV: ENHANCING HUMAN
youth empowerment programmes. DEVELOPMENT

69. Sir, under the social cash transfer 72. Mr. Speaker, health, education
programme, 700,000 households will be as well as water and sanitation are
targeted while 80,000 beneficiaries will key to attaining sustainable economic
be supported under the food security development. These sectors contribute to
pack in 2020. To empower women and improving the wellbeing of our people.
girls, Government under the Girls’
Education and Women’s Empowerment Education and Skills Development
and Livelihood Project will support 75,000
73. Mr. Speaker, to improve access
women with training in life and business
and quality of education, Government
skills by 2020. Under the same project,
will prioritise completion of some
16,000 adolescent girls will be supported
infrastructure development projects and
with educational provisions in order to
provision of school materials.
keep them in school. Further, more than
3,500 youths will be empowered with life
74. Sir, with regard to skills
skills and start-up kits to venture into
development, support to technical
business.
education, vocational and entrepreneurship
10
development as a means for job and wealth
creation will remain a priority. Skills and
entrepreneurship training to the out-of-
school youth and adults, will be accelerated
by better targeting of funds generated
through the Skills Development Fund.
75. Mr. Speaker, to improve the
progression rate from primary to
secondary school level, 68 out of 115
schools under the Zambia Education
Project have been completed this year.
Further, the construction of the 82
secondary schools under the Zambia
Education Enhancement Project, which
commenced this year, are scheduled for
completion in 2020.
76. Sir, to reduce the pupil teacher
ratio and enhance the quality of education
at early childhood, primary and secondary
school levels, Government, in 2019,
recruited and deployed 2,009 teachers out
of which, 1,263 were female. The majority
of the teachers recruited were in the fields
of science, mathematics and technology.
77. Mr. Speaker, to enhance the
skills of teachers in science, mathematics
and technology subjects, Government
completed the construction of the
National Science Center in 2019. The
Center provides in-service training to
local and foreign teachers. So far, 150 local
and 50 foreign teachers have been trained.
In addition, 550 Zambian lecturers of
education in science have been trained at
the Center.
78. Sir, the Home Grown School
Feeding Programme, targeting vulnerable
children, will continue to be implemented
to increase learner attendance and
retention. Currently, one million learners
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countrywide are benefiting from the
Programme. Further, to enhance equity,
35 percent of schools at early childhood,
primary and secondary level, cater for
learners with special education needs.
79. Mr. Speaker, at university level,
focus in 2020 will be on the completion
of the on-going projects. Further,
construction of student hostels at the
University of Zambia, Copperbelt
University and Mulungushi University will
be completed.
80. Sir, to improve financing to
the education sector, Government has
continued to strengthen the recovery of
loans under the Higher Education Loans
and Scholarships Scheme. This is in an
effort to increase coverage of students
receiving support at our public universities.
81. Mr. Speaker, to strengthen skills
development, equipment was procured
for 26 Technical Education Vocational and
Entrepreneurship Training institutions
across the country using the Skills
Development Fund.
Health
82. Mr. Speaker, Government will
continue to strengthen the health system
and provide essential medical supplies
for the delivery of quality health care
services as close to the people as possible.
In this regard, Government has continued
with the recruitment of frontline health
personnel, infrastructure development
and provision of medical supplies.
83. Sir, in 2019, Government has
recruited 3,000 nurses and 309 medical
doctors to operationalise constructed
health facilities. Government remains
committed to improving the health
personnel to population ratio.
84. Mr. Speaker, the construction
of health facilities to improve access to
health services will continue. In 2019,
the construction of a specialized hospital
in Lusaka reached 75 percent completion
while Petauke and Chinsali General
Hospitals were at 80 percent and 90 percent
completion, respectively. In addition, the
upgrading of the Maina Soko Military
Hospital reached 58 percent completion,
while Levy Mwanawasa Medical University
is at 80 percent. Further, the project to
construct 650 health posts, of which 342
have been completed, will continue in
2020.
85. Sir, significant investment has
been made in strengthening the supply
chain of essential medicines and medical
supplies. In this regard, the Lusaka ultra-
modern central warehouse has been
completed and is fully operational. In
2020, focus will be on the implementation
of an integrated procurement, financing
and logistics system and scaling up of
24 hour pharmaceutical services in all
the provinces to ensure timely supply of
essential medicines and medical supplies.
86. Mr. Speaker, to enhance healthcare
financing and promote universal access
to health services, Government remains
committed to implementing the National
Health Insurance Act No. 2 of 2018.
Government will therefore, continue
engaging stakeholders to ensure smooth
implementation of the Act.
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Water Supply and Sanitation
87. Mr. Speaker, to improve
universal access to water and sanitation,
Government continued to implement
the National Urban and Rural Water and
Sanitation Programmes. Projects being
implemented under the National Urban
Water and Sanitation Programme include
the Nkana Water Supply and Sanitation
Project, Lusaka Water Supply and
Drainage Project, Chongwe Water Supply
Project and Kafulafuta Water Supply
System Project. The Kafulafuta Project
will provide clean and safe water to cover
over one million people in Mpongwe,
Luanshya, Masaiti and Ndola districts in
the Copperbelt Province.
88. Sir, under the Rural Water and
Sanitation Programme, Government is
setting up piped water schemes as well
as drilling and rehabilitating boreholes.
In 2019, a total of 225 boreholes have so
far been drilled and equipped with hand
pumps. Other projects include piped
water schemes in Mwense District to
cater for 15,000 people. Further, under the
Transforming Rural Livelihood Project
in Western Province, 863 boreholes have
been drilled and 10 piped water schemes
are at various stages of construction.
 PILLAR V: CREATING A
CONDUCIVE GOVERNANCE
ENVIRONMENT FOR A
DIVERSIFIED AND INCLUSIVE
ECONOMY
Policy, Regulatory and Structural
Reforms
89. Mr. Speaker, a conducive
governance environment is important in
creating the conditions necessary to trigger
and sustain economic diversification,
job creation and inclusive growth. It is
in this regard that the implementation of
policy, regulatory and structural reforms
continued in 2019. These reforms, which
are part of the Economic Stabilization
and Growth Programme, are aimed at
enhancing domestic resource mobilization,
refocusing expenditure, narrowing
the fiscal deficit, reducing the pace of
debt accumulation, and dismantling of
domestic arrears.
90. Sir, these reforms coupled with
austerity measures will continue in 2020
and the medium term.
Domestic Resource Mobilization
91. Mr. Speaker, to enhance domestic
resource mobilization, Government in
the medium term will implement the
following measures:
i. Continue with the
modernization and automation
of revenue collection processes
and provision of Government
services. The Government will
implement a service platform
and payment gateway to create
efficiencies in service delivery
and enhance tracking of
revenues;
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ii. Continue rolling out
implementation of the
Electronic fiscal devices, to curb
tax evasion and further improve
revenue collection by making
it mandatory to use them for
all consumption tax related
transactions;
iii. Develop a National Policy on
Avoidance of Double Taxation
Agreements to protect the
revenue base;
iv. Enhance implementation of the
provisions of the Rating Act
No. 21 of 2018 to ensure that all
property developers and traders
are included in the tax base;
v. Accelerate implementation of
land titling and revaluation
of properties following the
enactment of the Rating Act so
as to increase revenue collection
and use third party information
to identify non-compliant
developers;
vi. Continue to review legislation
for non-tax collecting
institutions and adjusting fees
and fines to cost reflective levels;
and
vii. Invest in human capacity
development and technology to
support revenue collection.
92. Sir, on the expenditure side, the
measures will include:
i. Effective management of the
public service wage bill and
other expenditure areas such as
subsidies;
 ii. Minimise the cost of running
Government;
iii. Halt the accumulation
of domestic arrears and
prioritise the dismantling of
the current stock in order to
unlock liquidity and stimulate
economic activity in the
country;
iv. Use off balance sheet financing
model such as Public-Private
Partnerships;
v. Re-scope some works in the
road sector from bituminous to
gravel in order to reduce costs;
and
vi. Revise the Public Procurement
Act to provide for reference
pricing and strengthen oversight
for high value procurements.
Debt Management Policy
93. Mr. Speaker, prudent management
of debt remains a key priority to ensure
that debt is maintained within sustainable
levels. To this end, the Government will:
i. Slowdown external debt
contraction;
ii. Postpone or cancel some
pipeline loans;
iii. Cease the issuance of
guarantees; and
iv. Refinance existing loans.
94. Sir, to enhance these measures,
Government will develop the 2020 to 2022
Medium Term Debt Strategy to ensure
that Government’s financing needs are met
at the lowest possible cost, consistent with
a prudent degree of risk.
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Arrears Dismantling Strategy
95. Mr. Speaker, to address the
challenge of domestic arrears, Government
will implement the following measures:
i. Increase the allocation of funds
to reduce the stock of domestic
arrears;
ii. Use of Debt swaps to liquidate
part of the outstanding arrears;
and
iii. Enhance commitment control
systems to curb further
accumulation.
Monetary and Financial Sector Policies
96. Mr Speaker, in 2020, monetary
policy will focus on bringing inflation
back to the target range of 6-8 percent in
the medium-term. In this regard, the Bank
of Zambia will continue to strengthen
the forward-looking monetary policy
framework anchored on the Policy Rate
as the key signal of the monetary policy
stance.
97. Sir, Government will continue to
ensure that financial stability is maintained.
The Bank of Zambia will continue to
implement measures aimed at enhancing
the resilience of the financial system,
to both internal and external economic
and financial shocks. In addition, risk
management will be enhanced.
98. Mr. Speaker, to contribute to
the development of the capital market,
Government will introduce an electronic
trading platform to increase transparency,
price discovery and liquidity in the
secondary market for Government bonds.
External sector policies
99. Mr. Speaker, Government will
continue to pursue open economy policies
aimed at encouraging trade, attracting
foreign investment and accumulating
international reserves. In this regard,
Government will continue to promote
export diversification and maintain a
liberal foreign exchange regime.
Public Investment Management
Reforms
100. Mr. Speaker, Government has
developed a comprehensive system for the
appraisal of projects in order to strengthen
the management and implementation
of public investments. To support this
Public Investment Management System,
Government has constituted a multi-
sectoral Public Investment Board to
appraise major public investment projects.
Census of Population and Housing
101. Mr. Speaker, Government will
undertake a Census of Population and
Housing in August 2020. In preparation
for the Census, two core activities have to
be conducted, namely mapping and listing,
and a pilot census. Mapping and listing
has commenced and has successfully been
completed for Lusaka Province.
Budget Process and Tax Policy Review
102. Sir, Government will undertake
a comprehensive review of the tax system
and budgeting process and implementation
to make it more responsive to the needs of
the economy.
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PART III
THE 2020 BUDGET
103. Mr. Speaker, the 2020 Budget
I am presenting today, seeks to further
consolidate the austerity measures that
Government has been implementing by
directing resources and efforts towards
stimulating the domestic economy
by dismantling domestic arrears and
addressing the debt overhang. The
process of formulating the 2020 Budget
was informed by the compelling need to
continue consolidating the fiscal position
whilst safeguarding the allocations on
social protection and other core service
delivery areas.
104. Sir, Government proposes to
spend K106.0 billion in 2020, representing
32.4 percent of GDP. Of this amount,
K72.0 billion, representing 22.0 percent of
GDP will come from domestic revenues,
while the balance will be raised through
domestic and external financing.
105. Mr. Speaker, as a key strategy
to stimulate economic activity, I have
increased the allocation towards
dismantling of arrears to K2.3 billion in
2020 from K437 million in 2019. Further,
Government will reduce borrowing from
the domestic market to 1.1 percent of GDP
from 1.4 percent of GDP in 2019.
106. Sir, the fiscal deficit is projected
to reduce to 5.5 percent of GDP in 2020
from 6.5 percent in 2019. This is a clear
demonstration of Government’s resolve
to restore fiscal health and stabilize the
economy.
107. Mr. Speaker, in light of this
background, I now provide the specific
details of the 2020 Budget.
Expenditure Allocations by Functions
of Government
108. Mr. Speaker, the expenditure
allocations I propose in this Budget are
16
aligned to the priorities of the Seventh
National Development Plan. To efficiently
allocate resources in the 2020 Budget,
the Output Based Budgeting system has
been rolled out to 22 more Ministries and
Spending Agencies from seven in 2019.
2020 Expenditure by Functions of Government

17

General Public Services
109. Mr. Speaker, in order to ensure
smooth running of Government, I have
allocated a total of K44.1 billion for General
Public Services. Notable expenditures
under this category include K33.7 billion
for debt obligations and K2.3 billion for
dismantling of arrears to unlock the much
needed liquidity in the market.
110. Sir, to empower our local
authorities, I have allocated K1.2 billion for
the Local Government Equalization Fund.
Further, K249.6 million has been allocated
for the Constituency Development
Fund for the implementation of projects
identified by local communities to address
their immediate development needs.
111. Mr Speaker, I have allocated
K636.0 million towards redemption of the
Eurobond.
112. Sir, I have also allocated K135.0
million towards voter registration and
other election related expenditures. For any
unforeseen and unavoidable expenditures,
I have allocated K100.6 million. I have
also allocated K100.0 million to the
Compensation Fund.
Economic Affairs
113. Mr. Speaker, I propose to spend
K21.8 billion under Economic Affairs
function. Of this amount, K10.6 billion
is for road infrastructure, K1.1 billion
towards Farmer Input Support Programme
and K660.0 million towards the purchase
of strategic food reserves.
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114. Sir, Further, to enhance livestock
and fisheries production and productivity,
I propose to spend K225.6 million.
This allocation will facilitate enhanced
animal and fisheries breeding and stock
improvement, disease control measures, as
well as research and development among
others. Further, to support the adoption of
climate smart agricultural technologies, I
have allocated K97.9 million for extension
services for crop, livestock and fish
production.
115. Mr. Speaker, these interventions
are critical if we are to ensure national and
household food security in the wake of the
challenges posed by climate change.
116. Mr. Speaker, I have allocated K1.1
billion for investment in energy power
infrastructure to diversify and boost the
electricity generation capacity. To increase
access to electricity in rural areas, I have
allocated K166.3 million to the Rural
Electrification Fund.
117. Sir, other provisions under the
Economic Affairs category, include,
support to the economic empowerment
of women and youths, 2020 Census of
Population and Housing and promotion
of the decent work agenda.
Education and Skills Development
118. Mr. Speaker, to increase access and
improve the quality of education and skills
training at all levels, I propose to spend
a total of K13.1 billion in 2020. Out of
this amount, I have allocated K7.0 billion
to primary education and K2.2 billion
to secondary education. For university
education, I propose to spend K2.0 billion
out of which K557.0 million is for student
loans.
Health
119. Mr. Speaker, I have allocated a
total of K9.4 billion to the health function
representing an increase of 16 percent
from the 2019 allocation. Of this amount, I
propose to spend K5.0 billion for primary
health service delivery which includes
health promotion, disease prevention and
treatment. Further, K2.9 billion has been
allocated for hospital services such as
curative, rehabilitative and palliative care
services.
120. Sir, in order to ensure steady supply
of drugs and medical supplies in all our
health facilities, I have allocated K900.6
million for the procurement of essential
drugs and medical supplies.
Housing and Community Amenities
121. Mr. Speaker, I propose to spend
a total of K3.5 billion towards housing
and community amenities function. Of
this amount, K1.6 billion will go towards
the Nkana Water and Sanitation Project,
Kafulafuta Water Supply System Project
and the Lusaka-Kafue Bulk Water Supply
Project. I have also allocated K185.0 million
for various water supply and sanitation
programmes in the country. Further, I
have allocated K247.9 million for the
development of housing infrastructure.
Social Protection
122. Mr. Speaker, social protection
remains a key priority of the Patriotic Front
Government. In this regard, I propose to
spend K2.6 billion, of which K1.0 billion
will go towards paying retirement benefits
to public service workers to reduce the
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waiting time between retirement and
receipt of benefits.
123. Sir, to support the most vulnerable
in society, I propose to spend K1.0 billion
on the Social Cash Transfer programme
of which K347.9 million is a commitment
from our Cooperating Partners. I have
also allocated K122.2 million for the
Food Security Pack and Public Welfare
Assistance Scheme.
Other Functions
124. Mr. Speaker, I propose to spend a
total of K11.6 billion on the functions of
Defence, Environmental Protection and
Recreation, Culture and Religion.
125. Mr. Speaker, the 2020 Budget is
anchored on enhancement of domestic
revenue aimed at increasing Government
resources to undertake essential public
services and developmental programmes
as outlined in the Seventh National
Development Plan.
Revenue Estimates and Financing
126. Mr. Speaker, in order to finance
expenditure spelled out for the 2020
Budget, the Government expects to
raise a total of K106.0 billion for the
2020 Budget. K53.8 billion will be raised
from taxes, K18.2 billion will come from
non-tax revenues, and K3.1 billion will
come as project support grants from
our Cooperating Partners. In addition,
domestic financing accounts for K3.5
billion while K27.5 billion will be sourced
externally.
127. Sir, despite the tight fiscal position,
Government has decided to maintain
direct tax rates to safeguard the disposable 128. Mr. Speaker, the summary of the
income of our people. estimates of revenue and financing to

g
Resource Envelope for the 2020 Budget

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support expenditure in 2020 is as follows:
Revenue Estimates and Measures
Value Added Tax
129. Mr. Speaker, in the 2019 Budget
Address, Government proposed to abolish
Value Added Tax and replace it with
Sales Tax. Following the pronouncement,
a number of concerns were raised by
various stakeholders, which included the
cascading effect, negative impact on GDP
growth and job losses through elimination
of intermediaries in the supply chain.
As a listening Government, we decided
to carry out countrywide stakeholder
consultations.
130. Sir, based on the outcomes of the
consultations, Government has decided
to maintain the Value Added Tax, but
address the compliance and administrative
challenges. In this regard, I intend to
introduce the following administrative
measures to strengthen enforcement and
efficiency of VAT:
i. Upgrade the Taxonline system
for domestic taxes and interface
it with customs system to ensure
that all claims of refund for
import VAT paid to Customs
Services during import of goods
are validated through systems
based controls against data in
the customs system;
ii. Make it mandatory to use
Electronic Fiscal Devices (EFD)
for VAT and other tax types
and facilitate accreditation of
additional EFD distributors and
Virtual EFD software suppliers
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and vendors;
iii. Make it mandatory to capture
and electronically transmit to
ZRA the Taxpayer Identification
Number and Name of both
the buyer and seller of goods
and services in all Business
to Business and Business to
Government transactions;
iv. Enhance Data Analytics and
bulk data matching with third
party institutions such as Patents
and Company Registration
Agency, Ministry of Lands and
Natural Resources, NAPSA,
ZESCO and the Zambia Public
Procurement Authority;
v. Accelerate implementation of
the Government Service Bus
and Payment Gateway to ensure
interface with ZRA; and
vi. Augment and ensure timely
audits of VAT claims, including
outsourcing services of external
forensic auditors whenever
necessary.
131. Mr. Speaker, I further propose the
following measures:
i. Zero rate capital equipment
and machinery for the mining
sector;
ii. Standard rate ancillary services
that are directly linked to
the transit of goods through
Zambia;
iii. Dis-allow claims of VAT on
consumables such as stationery,
lubricants and spare parts.
This measure will not apply
to businesses for which these
 consumables are stock in trade;
iv. Limit input VAT claims by
mining companies on diesel to
70 percent from 90 percent; and
v. Limit input VAT claims by
mining companies on electricity
to 80 percent from 100 percent.
132. Sir, to encourage value addition, in
line with Government’s industrialisation
and job creation agenda, I propose to zero
rate copper cathodes sold locally.
133. Mr. Speaker, to mitigate the impact
of climate change and promote the use of
alternative energy sources, I propose to
zero rate the supply of gas stoves, other gas
cookers and gas boilers.
Customs and Excise
134. Mr. Speaker, I propose to introduce
duty at 10 percent on specified capital
equipment and machinery imported by
mining companies which are currently
duty free or attract 5 percent. This
measure is intended to raise revenue for
the Government and discourage transfer
pricing.
135. Sir, in order to promote local
production of Flexible Intermediate Bulk
Containers and create jobs, I propose to
impose a surtax at the rate of 5 percent on
these containers.
136. Mr. Speaker, in order to maintain
competitiveness of domestic producers of
cigarettes and increase revenue collection,
I propose to increase the specific excise
duty rate on cigarettes from K240 per mille
to K265 per mille.
137. Sir, in order to streamline the Duty
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Draw Back Scheme, I propose to limit the
duty refunds under the scheme to import
duty paid by a claimant and remove refunds
of implied duties on locally sourced inputs.
138. Sir, in order to encourage
sustainable industrialisation while
mitigating the effects of climate change, I
propose to suspend import duty, for three
years, on the importation of machinery
for processing of solid waste to generate
electricity and produce organic fertilizers.
139. Mr. Speaker, in order to mitigate
the effects of climate change and air
pollution, I propose to increase carbon tax
on all motor vehicles entering Zambia by
20 percent.
140. Sir, to promote the aquaculture sub
sector and make community fish farming
affordable, I propose to suspend duty
for three years on selected aqua culture
equipment.
Direct Taxes
141. Mr. Speaker, in order to rationalize
the capital relief granted to mining
companies, I propose to reduce capital
allowances claimed by mining companies
in respect of capital expenditure from 25
percent to 20 percent.
Housekeeping measures
142. Mr. Speaker, I propose to amend
the Income Tax Act, Customs and Excise
Act, Property Transfer Tax Act and Value
Added Tax Act so as to update, strengthen
and remove ambiguities in certain
provisions of the tax laws and make tax
administration more effective. The details
of the proposed changes will be reflected
in the respective legislation that I will later
introduce in the house. enforce all the provisions of the Public
Finance Management Act No. 1 of 2018.
Non-Tax revenue measures
149. Mr. Speaker, I am confident that,
143. Mr. Speaker, I propose to revise working together as a people with support
upwards, to cost reflective levels, various from all our development partners, we
fees and fines charged by Government can achieve the set targets. It is therefore,
departments. my responsibility, your responsibility, our
responsibility to do more to reinvigorate
144. Sir, all the measures that I have our economy.
outlined will take effect on 1st January,
2020. 150. Sir, in unity, no challenge is
insurmountable. Together we must emerge
PART IV stronger from the current challenges.
Together we can do it.
CONCLUSION
151. Mr. Speaker, I commend the 2020
145. Mr. Speaker, the 2020 Budget is Budget for favourable consideration by
presented amidst economic challenges this August House.
that have stifled inclusive growth. Our
resolve to do more with less requires all 152. Mr. Speaker, I beg to move.
of us to focus our resources and efforts
to stimulating our economy. This budget
therefore, presents us with an opportunity
to change our trajectory and put our
economy on a sustainable path.
146. Sir, it cannot be business as usual.
As a responsible Government, we will
address these challenges, including the
escalation of debt and the effects of climate
change.
147. Mr. Speaker, for Government
to have resources required to meet our
development needs, every citizen must
pay their fair share of taxes. I therefore
appeal to all my fellow citizens to be tax
compliant. To tax evaders, be warned that
the long arm of the law will soon visit you.
148. Sir, corruption is against our core
national values and will not be condoned.
Let me reaffirm the Patriotic Front
Government’s resolve to protect public
resources. To this end, Government shall

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